You remember the Pandemic selloff.
I remember it very well. Stocks had been a bit “wobbly” for more than a month as we made our way through earnings season. The banks had delivered a good set of results in the opening weeks of earnings, just like this quarter.
The Nasdaq 100 – large cap technology stocks – were on a rip as the first mentions of AI had been made.
The rest of the market, meh. Just like today.
Pandemic news started hitting the headlines in the third week of February. Within weeks the S&P 500 crashed 34% from its all-time highs. Then came one of the most resilient recoveries the market has ever seen. Stocks recovered their gains in four months and went on to one of the strongest bull market runs since the late 1990s.
Most investors remember the recovery, which is why we’re starting to hear claims that the Liberation Day crash is a repeat performance you don’t want to miss.
Hell, I’m even thinking that its time to remove my hedges and add to my longs.
Funny Sidenote: That’s always a sign the top is coming.
Put all of that aside and let’s take a few minutes to look at the differences between the Pandemic crash and recovery and today.
The April 2025 “Liberation Day” selloff was fast, brutal, and eerily familiar.
Within a span of just three trading sessions - from April 2 to April 7 - the S&P 500 plunged 17%, small caps cratered into a technical bear market. More than $6.6 trillion in market value vanished. Volatility went through the roof.
For investors who lived through the 2020 pandemic crash (most of us), the comparison felt uncomfortably close.
In both cases, the market was already showing cracks before the actual trigger hit. In both cases, a news event shocked an overly complacent Wall Street. And in both cases, the VIX spiked hard - exposing just how fragile sentiment really was.
But despite those similarities, the truth is: this isn’t 2020.
And if you’re assuming a V - shaped rebound is coming just because that’s what happened last time, you might be walking straight into a bear trap.
Let’s go through the parallels - and the critical differences.
The pandemic selloff in 2020 technically began before COVID became a full - blown global crisis.
The S&P 500 peaked on February 19, 2020. A week later, it was already sliding. By March 11, when the WHO declared a global pandemic and the U.S. shut off European travel, the decline had turned into a panic.
Now fast forward to 2025.
The S&P 500 also began fading from its highs in late March. Stocks started to slide a week before Trump’s “Liberation Day” tariff announcement on April 2. Investors were fearing the worst news. They got even worse news.
Just like in 2020, the index was already rolling over before the main event. The market was hinting – loudly - that something wasn’t right.
This is one of those key behavioral tells that seasoned traders watch. If the market is making lower highs and fading into a news catalyst, it usually means institutional money is already heading for the exits. The event itself just speeds things up.
If there’s one indicator that captured the raw emotion in both selloffs, it’s the CBOE Volatility Index ($VIX), simply referred to as the VIX.
In 2020, the VIX rocketed from the low teens in February to above 80 in March - its highest level on record. That surge wasn't just about fear; it was about forced selling. Delta hedges gone wrong. Hedge funds were deleveraging. Institutions hitting stop - loss levels. Everyone running for the door at once.
In 2025, the move was faster but no less intense.
The VIX surged more than 15 points in 48 hours, hitting the mid - 40s by April 4. That’s not quite pandemic - level fear, but it’s the highest reading since the March 2020 crash - and it happened almost instantly.
A lot of investors are looking to that as the all-clear sign. Hold that thought.
Volatility like that doesn’t happen in a vacuum. It reflects sentiment snapping from complacency to chaos. For weeks leading into April, the market was calm. Too calm.
Volatility was grinding lower. The bulls were back in control.
Then came “Liberation Day.”
President Trump’s sweeping 10% tariff on nearly all imports blindsided the market. Within hours, futures were in freefall. When China retaliated just two days later with 34% tariffs of their own, the panic turned into a stampede. The VIX didn’t just spike—it detonated.
So, yes—on the surface, the two selloffs look similar. Highs before the trigger. Sudden policy shocks. VIX explosions. But here’s where things really start to diverge.
In 2020, the Fed was the hero.
As soon as markets buckled under COVID pressure, the Federal Reserve slashed interest rates to zero, launched massive quantitative easing, and backstopped credit markets. Within a matter of weeks, liquidity was flowing and the financial system stabilized.
The S&P 500 bottomed on March 23 and never looked back.
In 2025? No such cavalry.
When the market imploded after Trump’s tariff announcement, the Fed stood still.
No rate cuts. No emergency liquidity. Nothing. That’s because today’s Fed is still fighting inflation - and that fight isn’t over.
In fact, multiple Fed governors in April 2025 explicitly warned that tariffs would likely increase inflation in the months ahead. That put Chair Powell in a box: act to calm markets and risk re-igniting inflation - or hold the line and let volatility do its thing.
He chose the latter.
Which means we’re now in a very different environment than 2020. Back then, investors could count on the Fed to pump liquidity into the system and prop up asset prices. Today, the Fed might tighten further if inflation ticks up. That’s not exactly bullish.
One of the most overlooked differences between the two crashes is investor sentiment heading into the event.
In 2020, people were blindsided. There was no playbook for a global pandemic. No one had modeled “lockdown” risk into their portfolios. Panic was understandable.
In 2025, investors thought they were prepared. After years of macro scares—wars, inflation, rate hikes—traders assumed the worst was behind us. But “Liberation Day” pulled the rug out. All those assumptions about global growth and supply chains went up in smoke in one press conference.
Still, sentiment hasn’t yet reached the despair levels we saw in 2020. The VIX says fear is high—but not maximum. Put/call ratios have risen, but they’re not off the charts. Flows into safe havens like Treasurys have increased, but not with the urgency you’d expect if this were a full - scale capitulation.
On Wednesday I wrote…
In an expected twist, the CNN Fear & Greed Index has turned to “greed” already. This follows weeks of “fear” and “extreme fear” readings. This move tells us that the “hopium” trade is in full force.
Unfortunately, investor’s willingness to keep trying to catch the falling knife will work against us in the summer months.
All of this suggests we could still see more downside pressure before a lasting bottom is in. Markets don’t usually bottom on fear—they bottom on disgust.
We’re not there yet.
The 2020 crash was met with historic monetary and fiscal stimulus. The Fed went full throttle. Congress passed multi-trillion dollar relief packages. That’s why the market recovered so quickly, because there was a wall of money underneath it.
In 2025, the opposite is true.
Inflation is still sticky. The Fed can’t cut rates. Washington isn’t talking stimulus—it’s talking about decoupling from China. Tariffs are likely to tighten financial conditions, not loosening them. There’s no wall of money this time.
Add in slowing GDP, rising jobless claims, and the risk of stagflation—and the setup looks very different.
That doesn’t mean there aren’t buying opportunities. But it does mean you need to be a lot more selective.
Keep your eye on deeply discounted stocks with long-term growth potential like the AI Nuclear industry names. Another area of long-term interest is the Quantum Computing industry stocks like D-Wave Quantum (QBTS) and Rigetti Computing (RGTI).
Always consider using a Dollar Cost Averaging (DCA) approach when buying deeply discounted stocks during long-term bear market trends.
